Las primeras asociaciones docentes de la Provincia de Misiones

DJIA analyzed, let us, now, look at NASDAQ Composite.

CHART –21NASDAQ COMPOSITE MONTHLY FROM1996 TO March 15, 2007

The above chart is much simpler than DJIA. The trends are clearly distinguishable. That there was mania formation during up ward cycle needs no elucidation. Though the chart does not furnish beginning point of the upward cycle, the simple fact that the index multiplied 6.9 times between January 1995 and March 2000 establishes existence of mania quite convincingly.

The chart also exhibits the melt down phase of mania also rather dramatically. In Wave A down, therefore, index corrects from 5132 to 1108. Two factors do also get clarified here. Firstly that Wave 4 of upward cycle came to an end around October 1998 and if so, the mania formation was a part of extended 5th wave and not out of Wave B as seen in DJIA above.

Most significantly, between March 2000 and October 2002 both DJIA and NASDAQ had corrected severely with scale of severity being much lesser in the former. Therefore, it would not be imprudent to suggest that a part of the proceeds of encashment from NASDAQ actually was diverted in to DJIA to sustain the mania possibly with the idea of reaping additional profits therefrom later.

The downfall from March 2000 to October 2002 constitutes the Wave A downwards and if that were so, recovery since then up to February 2007 would comprise of Wave B upwards. Let us draw a Fibonacci Retracement Fan between the high of March 00 and October 02. Measured against the Fan, the Wave B appears to have recovered up to nearly 0.382 levels, which is very normal.

Following the logic, detailed above, present correction may be the beginning stages of Wave C down. In other words, irrespective of the fact that Wave C has began or waits to begin, there is hardly any doubt that NASDAQ is bound to face, yet again, a severe correction that may push the index down to 770 levels by 2011.

In simple words, capital market of North American continent is standing at the edge of a cliff with hardly any choice other than to go rolling down to the plains it climbed from.

South America

CHART - 22 ARGENTINA MERVAL MONTHLY FROM 1992 TO March 15, 2007

From North America let us come down to South America, which mostly consists of countries commonly referred to as 3rd World. I have furnished, towards the beginning of this article, chart of Brazil Bovespa. In order to select something different, I chose Argentina Merval.

What does Argentina Merval show? Leaving aside Wave Theory, it indicates that the index has gone up from 193.40 of November 2001 to 2226 by February 2007. To express in mathematical terms, the market index has multiplied 11.51 times. Whoops!

This makes my life easier as prevalence of mania is beyond doubt and as the chart looks, the same has curved out of nothing but extended 5th Wave. In order to estimate the likely trajectory of decline that waits, I availed two alternatives. Firstly, I drew a Fibonacci Retracement Fan between the low of 11/2001 and the high of February 2007. Secondly, I joined the highs of August 1997 & February 2007 and thereafter drew a line from the low of November 2001 parallel to the former. Mr. R. N. Elliot himself used this art of drawing trend channels extensively and recommended the same to be very useful for estimation purposes.

Now it needs no emphasis to suggest that mania, once over, will bring about avalanche and correction to the extent of 100% or near about will be there. However, since downward slide will comprise of three waves, we can apprehend that the sub wave 1 of Wave

A will retrace up to the levels of intersection of Fibonacci Retracement Fan and the trend line drawn from November 2001. In other words, the present wave of correction that has begun since February 2007 may be expected to retrace up to 1214 or worst come, 973 levels.

It must be stated here that what I am talking about is a phase of temporary respite after which the index is bound to correct further to, God alone knows, to what levels.

CHART -23BRAZIL BOVESPA MONTHLY FROM 1997 TO March 16, 2007

It will be injustice if we do not discuss about the chart of Brazil Bovespa since it happens to be one of the most dramatic ones.

December 1996, the index was sailing up in the sky at 70525 wherefrom it crashed to 6952.5 during the following month. Solid 90.14% correction in just about a month’s time and that is the kind of viciousness of that correction can assume when the bubble of mania bursts.

Following the logic that an upward cycle is followed by a three-wave correction, obviously the correction between December 1996 and January 1997 constituted the wave A downwards. Appreciation to the index since then constitutes Wave B.

If we draw Fibonacci Retracement Fan from the high of December 1996 to the low of January 1997, it is seen that present appreciation has reached up to 0.618 levels.

There is another interesting part to this Wave B. The Wave B, here, appears to be consisting of five sub waves of which the 5th has got extended to the extent of Mania. Wave B analyzed in terms of wave formations, indicates 1st sub wave maturing in July 1997, the 2nd retracing fully by September 1998, the 3rd reaching its crest around March 2000 and 4th retracing again till October 2002.Following the art of drawing trend lines, if we join the lows of 2nd and 4th sub wave and thereafter draw a line from the peak of 3rd, running parallel to the former, the sub wave 5 is seen maturing by January 2004 at 0.25 level of retracement going by the Fibonacci Retracement Fan stated above.

Wave B started with index at 6952.5 and reached 46752 by February 2007. In other words, there has been index multiplication 6.7 times, which, inter alia, confirms existence of mania again. Think of it. One mania breaks to develop another. Circumstances, investors even the modus operendi for the present mania may be entirely different from the earlier one, yet, the outcome is more or less the same. What happens next? When mania bursts, it falls to 17601 levels and thereafter to 4th wave level i.e.8224!